New Study Proves Once Again That “Trickle-Down Economics” Are A Massive Scam

trickle down economicsHow many times have you heard conservatives tell you that the rich are taxed too much? To hear the proponents of trickle-down economics tell it, you’d think that multi-millionaires and billionaires are the financial equivalent of the polar bear – an endangered species that must be protected at all costs. Every year, the poor billionaire has to go further and further to find sea ice to park his money on, won’t you please think of the polar bears? (Cue Sarah McLachlan’s “Angel” in the background as the camera zooms in on the faces of paunchy billionaires with sad puppy dog faces.)

For the past few decades, we’ve been told that if we cut tax rates on the richest people in the United States, trickle-down economics would finally work and we’d all be floating in a warm sea of jobs and unbridled prosperity. Yet the fact remains that despite tax rates for the wealthiest Americans being near historic lows, prosperity for everyone else just isn’t happening. Here in Louisiana, state universities are preparing for the possibility that they will have to declare bankruptcy, despite the fact that only 1 in 4 Louisiana corporations pay any net income tax and lawmakers are unwilling or unable to find new ways to close a $1.6 billion budget shortfall.

Now a new study from the National Bureau of Economic Research shows that giving tax cuts to the wealthiest has very little effect on the economy, further proving that trickle-down economics are nothing more than a scam designed to leverage more tax breaks for those who can easily shoulder the burden.

The study from Owen Zidar, a professor at the University of Chicago Booth School of Business, found that tax cuts aimed at the top 10 percent of earners produce little stimulative effect on the overall economy. On the other hand, those aimed at the bottom 90 percent have a greater impact.

Zidar examined the short- to medium-term impact of tax changes at the state and federal levels going back to 1948. On the national level, he found a 1 percent gross domestic product (GDP) tax cut aimed at the bottom 90 percent translates to job growth of 2 to 5 percent, but the impact of a similar cut on the top 10 percent of earners has a negligible effect. He reached similar conclusions on the state level: Tax decreases for most of the population generated 5 percent employment growth, but yielded little change when applied to the top income bracket.

Tax hikes produce similar effects, the paper says. When applied to the rich, they’re insignificant. But when applied to the rest of the population, they have a negative effect on economic activity. (Source)

Conservatives like to say that liberals and progressives base their arguments on emotions and not numbers or facts, but here we have a study backed by years of economic data which shows that trickle-down economics just don’t work.

The 1990s were the last great period of economic prosperity for all Americans – including the rich. Then there was nearly a decade under Bush policies which became a “lost decade” for the middle class during which income fell and the size of the middle class also shrunk. Since the rebound after the Great Recession of 2008, the economic swing has not benefited the middle class nearly as much as the richest Americans – but once again, we’re being told that the rich are taxed too much and we need to give them more breaks so that trickle-down economics will finally come into play.

If you look at this study and grasp how supply and demand works, it’s very clear that a strong economy which benefits all Americans (including the wealthy) depends on more money in the hands of more consumers, not more money in the hands of the 1%. Trickle-down economics are nothing more than a lie that has been repeatedly debunked, and this economic study proves again that they don’t work.


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